Key Insights

• The considerable ownership by individual investors in Northeast Securities indicates that they collectively have a greater say in management and business strategy
• A total of 5 investors have a majority stake in the company with 50% ownership
• Past performance of a company along with ownership data serve to give a strong idea about prospects for a business

To get a sense of who is truly in control of Northeast Securities Co., Ltd. (SZSE:000686), it is important to understand the ownership structure of the business. With 45% stake, individual investors possess the maximum shares in the company. In other words, the group stands to gain the most (or lose the most) from their investment into the company.

As a result, individual investors were the biggest beneficiaries of last week's 11% gain.

Let's delve deeper into each type of owner of Northeast Securities, beginning with the chart below.

What Does The Institutional Ownership Tell Us About Northeast Securities?

Institutional investors commonly compare their own returns to the returns of a commonly followed index. So they generally do consider buying larger companies that are included in the relevant benchmark index.

We can see that Northeast Securities does have institutional investors; and they hold a good portion of the company's stock. This implies the analysts working for those institutions have looked at the stock and they like it. But just like anyone else, they could be wrong. When multiple institutions own a stock, there's always a risk that they are in a 'crowded trade'. When such a trade goes wrong, multiple parties may compete to sell stock fast. This risk is higher in a company without a history of growth. You can see Northeast Securities' historic earnings and revenue below, but keep in mind there's always more to the story.

We note that hedge funds don't have a meaningful investment in Northeast Securities. Jilin Yatai (Group) Co., Ltd. is currently the largest shareholder, with 31% of shares outstanding. With 12% and 3.0% of the shares outstanding respectively, Jilin Province Trust & Investment Co., Ltd. and Liwang Group Co., Ltd. are the second and third largest shareholders.

Our research also brought to light the fact that roughly 50% of the company is controlled by the top 5 shareholders suggesting that these owners wield significant influence on the business.

Researching institutional ownership is a good way to gauge and filter a stock's expected performance. The same can be achieved by studying analyst sentiments. There is some analyst coverage of the stock, but it could still become more well known, with time.

Insider Ownership Of Northeast Securities

While the precise definition of an insider can be subjective, almost everyone considers board members to be insiders. The company management answer to the board and the latter should represent the interests of shareholders. Notably, sometimes top-level managers are on the board themselves.

I generally consider insider ownership to be a good thing. However, on some occasions it makes it more difficult for other shareholders to hold the board accountable for decisions.

Our data cannot confirm that board members are holding shares personally. It is unusual not to have at least some personal holdings by board members, so our data might be flawed. A good next step would be to check how much the CEO is paid.

General Public Ownership

With a 45% ownership, the general public, mostly comprising of individual investors, have some degree of sway over Northeast Securities. While this size of ownership may not be enough to sway a policy decision in their favour, they can still make a collective impact on company policies.

Private Company Ownership

We can see that Private Companies own 15%, of the shares on issue. Private companies may be related parties. Sometimes insiders have an interest in a public company through a holding in a private company, rather than in their own capacity as an individual. While it's hard to draw any broad stroke conclusions, it is worth noting as an area for further research.

Public Company Ownership

We can see that public companies hold 31% of the Northeast Securities shares on issue. This may be a strategic interest and the two companies may have related business interests. It could be that they have de-merged. This holding is probably worth investigating further.

Next Steps:

It's always worth thinking about the different groups who own shares in a company. But to understand Northeast Securities better, we need to consider many other factors. Take risks for example - Northeast Securities has 2 warning signs (and 1 which can't be ignored) we think you should know about.

If you are like me, you may want to think about whether this company will grow or shrink. Luckily, you can check this free report showing analyst forecasts for its future.

NB: Figures in this article are calculated using data from the last twelve months, which refer to the 12-month period ending on the last date of the month the financial statement is dated. This may not be consistent with full year annual report figures.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.